A major milestone for the global trading system was reached on Wednesday when the first multilateral deal concluded in the 21-year history of the World Trade Organization entered into force.
In receiving four more ratifications for the Trade Facilitation Agreement, the WTO obtained the two-thirds acceptance of the agreement from its 164 members needed to ratify the TFA.
Rwanda, Oman, Chad and Jordan submitted their instruments of acceptance, bringing the total number of ratifications over the required threshold of 110. The agreement, which seeks to expedite the movement, release and clearance of goods across borders, launches a new phase for trade facilitation reforms around the world and creates a significant boost for commerce and the multilateral trading system overall.
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Full implementation of the TFA is forecast to slash members’ trade costs by an average of 14.3 percent, with developing countries having the most to gain, according to a 2015 study by WTO economists. The TFA is also likely to reduce the time needed to import goods by more than a day and a half and to export goods by almost two days, representing a reduction of 47 and 91 percent, respectively, over the current average.
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The American Apparel & Footwear Association said the TFA will provide many benefits to apparel, footwear and travel goods companies by cutting red tape at the border, increasing supply chain transparency, and decreasing costs — benefits that will pass along value to American consumers, and potentially add to the four million Americans already working in the industry. The agreement is a major breakthrough for the future of international trade, potentially increasing global trade by up to $1 trillion per year.
Implementing the TFA is also expected to help new firms export for the first time. Once the TFA is in effect, developing countries are forecast to increase the number of new products exported by as much as 20 percent, with least-developed countries expected to see an increase of up to 35 percent, according to the WTO study.
WTO director-general Roberto Azevêdo welcomed the TFA’s entry into force, noting that the agreement represents a landmark for trade reform.
“This is fantastic news for at least two reasons,” he said. “First, it shows members’ commitment to the multilateral trading system and that they are following through on the promises made in Bali. Second, it means we can start implementing the agreement, helping to cut trade costs around the world. It also means we can kick-start technical assistance work to help poorer countries with implementation.”
The agreement allows developing and least-developed countries to set their own timetables for implementing the TFA depending on their capacities to do so. Developed countries have committed to immediately implement the TFA, which sets out a broad series of trade-facilitation reforms.
The TFA prescribes measures to improve transparency and predictability of trading across borders and create a less discriminatory business environment. The TFA’s provisions include improvements to the availability and publication of information about cross-border procedures and practices, improved appeal rights for traders, reduced fees and formalities connected with the import and export of goods, faster clearance procedures and enhanced conditions for freedom of transit for goods. It also contains measures for effective cooperation between customs and other authorities on trade facilitation and customs compliance issues.